Wakilii

Afro-Kai Ltd v Uganda Development Bank Ltd (Civil Suit No. 31 of 2014)

High Court · [2016] UGCOMMC 87 · 2016 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for breach of contract and loss of projected profits
Decision
Suit allowed. Plaintiff awarded special and general damages with interest and costs.

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that a contract existed between the parties when the defendant made a conditional offer of a term loan which the plaintiff accepted, notwithstanding that a formal loan agreement had not been signed. The defendant breached the contract by withdrawing the application from Bank of Uganda before Bank of Uganda denied the application. The conditions precedent allowed the defendant to cancel the offer only if Bank of Uganda denied refinancing; mere requests for clarification did not constitute denial. Plaintiff awarded special damages of UGX 11,297,595 for loan processing expenses and general damages of UGX 150,000,000 for inconvenience caused by the breach.

Outcome

Suit allowed. Plaintiff awarded special and general damages with interest and costs.

Facts

On 20 August 2012, the plaintiff applied to the defendant for an agricultural credit fund loan of UGX 4.7 billion to expand its grain processing business. On 6 November 2012, the defendant offered a term loan of UGX 3,732,559,200 subject to Bank of Uganda's approval of refinancing, and a working capital facility of UGX 660,000,000. The plaintiff accepted the working capital offer and paid associated fees. The defendant submitted the term loan application to Bank of Uganda on 9 November 2012. Bank of Uganda sought clarifications on 21 November 2012 concerning the company's three consecutive years of losses and requested further information at a meeting on 21 February 2013. On 18 April 2013, the defendant withdrew the application from Bank of Uganda and revoked the term loan offer, informing the plaintiff that it was unable to proceed. The plaintiff had incurred loan processing expenses of UGX 37,331,345 in expectation of the loan disbursement.

Issues

  1. Whether there was a contract between the parties.
  2. What were the terms of the contract.
  3. Whether the revocation of the term loan facility by the defendant amounted to breach of contract.
  4. What remedies are available.

Orders

  • Suit against the defendant succeeds.
  • Special damages awarded to the plaintiff: UGX 11,297,595.
  • General damages awarded to the plaintiff: UGX 150,000,000.
  • Interest at 12% per annum on special damages from the date of filing the suit till payment in full.
  • Interest at court rate on general damages from the date of judgment till payment in full.
  • Costs of the suit awarded to the plaintiff.

Rules and key headnotes

Contract Formation — Offer and Acceptance — Conditional Offers
A binding contract is formed when parties reach agreement on all material terms with the intention to create legal relations, even where a formal written agreement has not yet been executed. The court should look at the correspondence as a whole and the conduct of the parties to determine whether they have come to an agreement on everything material.
Contract Formation — Consideration — Sufficiency
The plaintiff's agreement to pay interest at 10% per annum on the amount to be advanced constitutes valuable consideration sufficient to support a loan contract.
Breach of Contract — Conditional Contracts — Interpretation of Conditions Precedent
Where a conditional loan offer reserves the lender's right to cancel if a third party refinancing application is denied, the lender breaches the contract by withdrawing the application before the third party makes a decision. A third party's requests for clarification or further information do not constitute a denial for purposes of triggering the cancellation clause.
Banking — Loan Applications — Duties of Financial Institutions
A financial institution that has made a conditional loan offer subject to third party refinancing approval is duty bound to support the application and endeavor to process it through to a decision. Withdrawing the application before the refinancing authority reaches a decision constitutes a breach of the lender's obligations under the contract.
Special Damages — Proof — Loan Processing Expenses
Special damages must be specifically pleaded and proved, but proof need not be supported by documentary evidence in all cases and depends on the circumstances. Where a plaintiff has incurred expenses in reliance on a loan offer that is subsequently breached, expenses such as loan application fees and valuation fees are recoverable as special damages.
General Damages — Loss of Projected Profits — Proof Requirements
Prospective loss of profits cannot be claimed as special damages because it has not been sustained at the date of trial. To be awarded as general damages, loss of projected profits must be proved on the balance of probabilities by evidence that the plaintiff had been making such profits previously or that there was evidence such profits were likely to be obtained. Mere projections unsupported by historical performance or reliable evidence are insufficient.

Legislation cited (2)

Cases cited (11)

  • Kibalama v Alfasan Belgie CVBA [2004] 2 EA 146
  • Tororo Cement Co Ltd v Frokina International Ltd (Civil Appeal No. 21 of 2001)
  • Patel v Spear Motors Ltd (SCCA No. 4 of 1991)
  • K and V Ltd v The Registered Trustees of Arya Practinidihi Sabha Eastern Africa (Civil Suit No. 299 of 2011)
  • Vallabbhai P Patel v Central African Commercial Agency [1959] EA 903
  • Gibson v Manchester City Council [1978] 1 WLR 520
  • Kuruma s/o Kaniu v R (1955) 22 EACA 364
  • Adonia Tumusiime v Bushenyi District Local Government and AG (Civil Suit No. 32 of 2012)
  • Gaaga Enterprises Ltd v SBI International Holdings & NV Uganda (Civil Suit No. 19 of 2005)
  • Kyambadde v Mpigi District Administration [1983] HCB 44
  • Robert Coussens v Attorney General (SCCA No. 8 of 1999)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Afro-Kai Ltd v Uganda Development Bank Ltd (Civil Suit No. 31 of 2014) [2016] UGCommC 87 (1 September 2016)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.